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2012: O'Brien: With Oracle vulnerable, CEO Larry Ellison embarks on final battle to shape his legacy

By Chris O'Brien

Mercury News Columnist

Posted:
10/04/2012 06:37:01 AM PDT

Updated:
09/03/2014 02:34:37 PM PDT

Click photo to enlarge

Oracle CEO Larry Ellison begins his keynote address at Oracle OpenWorld in San Francisco, Tuesday, Oct. 2, 2012. Ellison says he plans to turn the Hawaiian island that he recently bought into a laboratory for experimenting with more environmentally sound ways of living. Ellison says he hopes to convert sea water into fresh water on the 141-mile-square (365-square-kilometer) mile island of Lanai. He also wants more electric cars on the island and hopes to increase its fruit exports to Japan and other markets. (AP Photo/Eric Risberg)

SAN FRANCISCO -- If you need to be reminded just how quickly today's winner in Silicon Valley can find that perch suddenly precarious, look no further than Oracle.

Last year, during its annual OpenWorld conference, I marveled at how CEO Larry Ellison had made Oracle a model of stability compared to other tech giants.

This year, as the event wraps up in San Francisco, Oracle looks far more vulnerable, thanks to its struggles to digest the acquisition of Sun Microsystems and the perception that the company has been slow to embrace cloud computing.

But in a perverse way, it could also be good news for Oracle and Ellison.

At age 68, Ellison has been here many times, facing enormous challenges like new technologies and competitive shifts. In the past, he's risen to the task and left Oracle even stronger. Indeed, he never seems more engaged, more inspired, than when there is some perceived threat to the company he cofounded in the late 1970s.

Now, in the twilight of his remarkable tenure, comes this last, great challenge to burnish his legend. During his two keynotes this week at OpenWorld, Ellison again demonstrated that he had not lost an ounce of faith in himself.

"What we offer in the cloud is about to get better, a lot better," Ellison proclaimed in this opening keynote on Sunday.

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That confidence can't entirely mask the fact that Oracle faces its share of doubters over its ability to reinvent itself for the cloud computing era.

And many have noted that Oracle's challenges may have been compounded by what increasingly looks like a rare, but major, misstep: its acquisition of troubled Sun Microsystems.

Over the past decade, Ellison led a campaign to acquire many of Oracle's mightiest software rivals. And to a large degree, that strategy worked. But buying Sun, which focused on hardware, seemed like a head scratcher at the time. And the wisdom of the deal has only drawn more questions over time.

Before OpenWorld, Patrick Walravens, an analyst at JMP Securities, raised a provocative point: Did Oracle spend so much time trying to fix Sun that it didn't move as quickly enough on its cloud strategy?

"Overall, we think Oracle would have been better off focusing more intensely on cloud computing early -- and we feel the Sun acquisition and engineered systems effort detracted from that focus," he wrote.

Not surprisingly, Oracle devoted a healthy chunk of this week's conference to explaining why its hardware strategy would be a winner and why it was in a better position than rivals to be a leader in cloud computing.

In a nutshell, by building the hardware and software that runs cloud-based systems, Oracle argues it can offer faster, more secure, more flexible services for customers.

"True cloud means we have to own the infrastructure, we have to manage the infrastructure, (and) we have to upgrade the infrastructure," Ellison said this week.

Let me point out, to be fair, that over the last six months, investors have remained bullish on the company, driving the stock up from about $25 in May to $31.82 per share when the markets closed Wednesday.

Still, Ellison and Oracle had plenty of convincing to do. "This is the third OpenWorld running where we heard about cloud," said IDC analyst Al Hilwa. "There's a trajectory of them getting more serious and more detailed and more effective than they were before. But until they break out those revenues from cloud offerings, it's not clear to me that they'll convince the street."

OpenWorld comes just a couple of weeks after cloud-computing rival Salesforce.com held its Dreamforce gathering. Salesforce CEO Marc Benioff and Ellison have a well-known rivalry, and Benioff has long taunted Ellison for being slow to get with the cloud trend.

Dreamforce attracted 90,000 attendees. This year, OpenWorld had an estimated 50,000 attendees. Aside from the ego bump of having the title of largest tech conference in the world, you have to wonder if users are starting to vote with both their feet and their IT budget dollars.

Oracle as underdog? Probably not. But then, this is just the type of dogfight Ellison has always relished. And the stakes for him and the company are both big and dramatic.

Will we one day look back and say that Ellison overstayed his time in the CEO chair? That he was too slow to embrace cloud computing and that his hubris led him to think he could salvage Sun?

Or does he transform Oracle, trump his rivals and lay a new foundation for that leaves his company on top for years to come?